Its full name is the Setting Every Community Up for Retirement Enhancement Act, a comprehensive legislative package finally passed by Congress and signed into law by the president last December.
Better known as the SECURE Act, it went live on January 1, and anyone working in the financial planning industry, particularly those specializing in retirement matters, will find the law chock-full of changes that will broadly impact the way they do business.
In previous years, there was an age cap, set at 70½, on contributions to ordinary IRA accounts. This restriction has now been eliminated, bringing the rules for traditional IRAs into line with those of Roth IRA accounts. This change allows seniors who remain in the workplace to continue making IRA contributions in support of their eventual retirement needs.
The former age for taking required minimum distributions (RMD) from qualified retirement accounts has been raised from the arcane 70½ to a more rational boundary age of 72. This gives people more time to bolster their retirement accounts and makes planning easier that under the old regime – the confusing 70½ limit often led to missteps and even penalties for clients.
The SECURE Act provides some relief to new parents: within one year of the birth of a child, parents can take funds from their retirement accounts without the usual early-withdrawal penalties, up to a limit of $5,000. These funds will still be counted as part of taxable income, however.
We’ve all heard of the onerous student loan burden carried by many young people. The SECURE Act offers a helping hand: people with funds in 529 savings plans will now be allowed to withdraw as much as $10,000 to help pay down student loans – a welcome boon to many weighed down by the long-term cost of education.
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8 Ways The SECURE Act Changes Financial Planning | Financial Advisor